A mortgage market analysis is conducted by looking for changes in several key indicators. Those indicators include interest rates on long-term fixed mortgages, new home sales, existing market inventory, home prices and types of mortgage financing activity. A greater amount of mortgages for new purchases versus refinances on existing loans can be indicative of a stronger market. Another common indicator used in a mortgage market analysis is the amount of outstanding loan debt.

Like other forms of market research, a mortgage market analysis relies on numerical data to paint a picture of aggregate trends and occurrences. While a change in one key indicator may foreshadow a period of decline or growth, it usually reflects a short-term market response to an external factor. For example, the number of refinance mortgages may temporarily increase in response to a sharp decrease in interest rates. This change may not be the result of a weakening market, as it could also be related to investors' wishes to free up cash flow in order to make additional real estate purchases.

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The amount of new home sales versus sales activity on existing homes is another factor to examine in a mortgage market analysis. A greater amount of new home sales can indicate an increase in construction activity due to an influx of new buyers. In other words, the market's growth and activity is attributed to first-time home buyers, vacation or second home purchases. This can indicate expansion as home buyers have adequate income to sustain multiple mortgages or home expenses and do not have to rely on the liquidation of current real estate assets.

An increase in existing home sales might be due to a high foreclosure rate or a need for homeowners to get rid of mortgage obligations. This may be seen in times of economic weakness, as the average income earner loses disposable income due to job loss, income loss or high rates of inflation. A disproportionate amount of existing home sales relative to new inventory can also be due to a high amount of demand relative to the supply of new construction.

Levels of market inventory can be used in a mortgage market analysis to determine whether the market is oriented toward the buyer or seller. The presence of high amounts of aged inventory usually reflects a buyer-oriented market, where the supply is greater than the demand. This can occur due to home builders' miscalculations on demand in a geographic location, a weak economy, or high amounts of selling activity. Likewise, a high amount of outstanding mortgage debt may indicate healthy purchase activity, the average homeowner's inability to pay his monthly obligation, or a heavy reliance on bank financing in order to afford a home.

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